France Expands Inquiry of Tax Evasion at UBS

Published 2:35 PM ET Mon, 10 June 2013
Updated 2:41 PM ET Mon, 10 June 2013
The New York Times

Frabrice Coffrini | AFP | Getty Images

French investigators have placed Swiss bank UBS under formal investigation on suspicion that it tried to persuade rich French clients to open undeclared accounts in Switzerland, a legal source said.

UBS, the biggest Swiss bank, is the target of a widening tax evasion investigation in France, a spokeswoman for the Paris prosecutor's office said on Friday, an indication that the lender's problems with the French government are growing.

A French judge on Thursday placed UBS AG, the Swiss parent company, under formal investigation on suspicion that it illegally sold banking services to French citizens that helped them to set up secret accounts abroad, according to Agnès Thibault-Lecuivre, the spokeswoman for the Paris prosecutor's office. The Swiss bank also was identified as an ''assisted witness,'' a less serious status, in a concurrent investigation of suspected money laundering and tax evasion, she said.

The expanded inquiry comes just a week after the bank's local subsidiary, UBS France, was put under formal investigation on similar suspicions. In the French legal system, a formal investigation, sometimes compared to an indictment in the American system, can drag on for years, and does not necessarily lead to charges or trial.

An assisted witness is required to answer prosecutors' questions with a lawyer present, but is thought less likely to ultimately face charges.

Yves Kaufmann Lobato, a UBS spokesman in Zurich, sought to play down the significance of the latest development, noting that the investigation had been the subject of news reports since early last year.

''We will continue working with the authorities in France within the applicable legal framework to arrive at a resolution to this matter,'' he added, citing a bank statement.

The investigators are examining the question of whether bankers from the Swiss parent company broke a French law against "illicit solicitation" by actively approaching potential French clients.

According to a report on Friday in the French newspaper Le Monde, UBS bankers regularly sought to ingratiate themselves into networks of affluent people, mingling at sporting events and concerts in order to seek out possible clients for tax evasion.

At least 353 French citizens suspected of evading taxes through UBS have been identified, and the French government has sought administrative assistance from the Swiss government in four cases, the newspaper reported, without citing its source.

Mario Tuor, a spokesman for the Swiss Federal Finance Ministry in Bern, declined to comment on the case, saying the details were confidential.

There is a broad push in the United States and Europe to stop offshore banks from aiding tax cheats. Switzerland—where the secrecy laws punish banks for revealing client data—has been in an uncomfortable spotlight. In France, President Francois Hollande has made ending tax evasion a top priority after his former budget minister, Jerome Cahuzac, was found to have set up secret Swiss and Singapore accounts to hide some of his wealth.

UBS itself has been under international scrutiny since 2008, when the United States Justice Department threatened to indict it for conspiracy to defraud the Internal Revenue Service. In 2009, UBS eventually agreed to pay a $780 million fine to avoid prosecution, and turned over data on 4,450 client accounts held by United States citizens suspected of evading taxes.

Obama administration officials followed that case with a broad push to expose all the American accounts hidden behind Swiss banking secrecy laws. With about a dozen Swiss lenders facing the possibility of indictment in the United States, the Swiss government agreed last month on a framework for banks to hand over information on American clients, a deal it hoped would permanently end the threat of United States prosecution. That agreement still must be approved by the Swiss legislature.

UBS said on Friday that it ''fully supports the strategy of Switzerland to limit itself to the management of declared assets.''

''We believe that Switzerland and the countries of the E.U. need to find a solution for the past,'' according to a statement from the bank. ''This is an industry issue that UBS has taken significant steps to resolve since 2009. UBS does not tolerate any activities intended to help its clients circumvent their tax obligations.''